This action might not be possible to undo. Are you sure you want to continue?
information of a confidential nature. The views expressed in this Report are tha t of CRISIL Research and not of CRISIL s Ratings Division / CRIS. No part of this Report may be published / reproduced in any form without CRISIL s pri or written approval.
Key Offerings Industry Company Competitive Benchmarking Valuation studies Evaluation of various business models Customised Credit Reports Vendor Assessment Market Sizing Demand/Supply Gap Analysis Input/Commodity Price Forecasting Impact Analysis of Economic/Regulatory Variables Project Feasibility/Pre-feasibility Studies Techno-economic viability studies (TEV) Project Vetting Location identification/assessment Sensitivity Analysis Automotive Commodities Hotels & Hospitals Infrastructure Logistics Oil & Gas Power Real Estate & Others Key Verticals CRISIL Industry Research covers 70 industries .
other inputs Choice of markets. sect oral and company research in India. commodity prices on your business Field-based information on variables and tracking indicators for ongoing review of opportunities/risks in your sectors of interest Assessment of credit/investment quality of your portfolio . utilises its proprietary information networks.CRISIL CRBCustomised Research Bulletin CRISIL Customised Research CRISIL Research. databa se and methodologies to provide you customised research inputs and conclusions for busi ness planning. targeted market share Product mix choices Production/sales planning CRISIL Research provides you the following inputs to help you identify/assess business opportunities or review business risks Identification/assessment of new business themes/areas Building futuristic scenarios and discontinuity analysis over the long term Assessing the impact of changes in economic variables. the leading independent and credible provider of economic. CRISIL Research provides research inputs and conclusions to support your decisions while Lending to an entity Taking a stake in an entity Transacting/partnering with an entity Feasibility of entry into a new business segment Feasibility of capacity expansion Choice of location. fuel. monitoring and decision-making.
as thhe gap between petrol and diesel prices has widened. Prasad Koparkar Head CRISIL Research . Diesel penetration (the proportion of diesel cars in total cars sold) is also expected to rise to 45 per cent by 2015-16 from the current level of 35 per cent. we have analysed the diesel cars segment.3 million units by 2015-16 . We are confident that you will find this repport highly informative and useful. The sector insights draw upon our rich andd extensive experience and knowledge base built over the last 20 years. According to our analysis. In the Opinion section. Customers are more likely to prefer diesel cars. we present ourviews on the Automobiles sector.Foreword In this edition of the Customised Researchh Bulletin. sales of diesel caars are expected to almost double to 2.
CRISIL CRB Customised Research Bulletin Contents Opinion Diesel car sales to more than double by 2015-16: CRISIL Research 01 Economic Overview February 2012 04 Industry Overview Two-wheeler 05 Commercial vehicles 06 Cars & UV 08 Auto components 10 Tractors 11 Independent Equity Research Report Hero MotoCorp Ltd 12 Customised Research Services Automobiles 13 Media Coverage 14 .
Diesel penetration the prooportion of diesel cars in total cars sold will rise from thhe current 36 per cent to 45 per cent in 2015-16. Custtomers are more likely to prefer diesel cars. which are still regulated. as the gapp between petrol and diesel prices has widened. given the big price gaap between petrol and diesel. which accounts for more than 60 per ceent of car sales in the country. esstimates CRISIL Research. with the dereegulation of petrol prices in June 2010 that enableed oil-marketing companies to increase petrol prices in line with any sharp rise in global crude oil prices.Opinion Diesel car sales will almost double froom current levels to 2. This strengthened buyer preference for diessel cars and UVs. Diesel car sales to mmore than double by 2015-16: CRISSIL Research The expanding gulf: Trend in petrol and diesel prices 30 35 40 45 50 55 60 65 70 75 80 Q1 Q2 Q3 Q4 Q1 Q2 Q3 2008-09 2009-10 Petrol Prices 29 per cent (In Rs/ litre) Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 . Even if the government increases excise duties on diesel cars or reduces subsiidies on the fuel. CRISIL Research therefore expects d iesel penetration in the Indian cars & UVs segment to ris e by 2-3 per cent to 38-40 per cent in 2011-12. Widening price gap drives buyer preference for diesel cars A sharp rise in petrol prices in the ppast year further widened its gap with diesel pricess. Petrol prices increased by 24 per cent. especially in the small car segment. rose by only 7 perr cent. Dieesel prices.3 million units in 2015-16. are launching diesel variants of their models. The price gap between the two fuels therefore wiidened by almost 4 per cent from 2008-09 to first quarter of 2011-12. The greater fuel economy of diesel cars assumes signnificance with the increasing traffic congestion on Indian roads. Carmakers. in response. we still expect diesel penetration of nnot below 40 per cent by 2015-16.
The reduced fuel usage limits ccarbon emissions by diesel cars studies by organizattions like ACEA. The calorific value of diesel fuel is roughly 45. slightly lower than petrol which is 45. despite the diesel engine also being heavier. offering 25 per cent more mileage per litre than ppetrol cars. 1 .8 MJ/kg.0 2010-11 2011-12 Diesel Prices 36 per cent Note: The above chart comparres difference of petrol prices over diesel prices Source: Industry.9 MMJ/litre compared to 33. but fuel economy helps buyeers recover premium Diesel cars are more fuel-effficient. Accounting for the difference in energy density.5 MJ/kg (megajoules per kilogram). CRISIL Reseearch Complex engine makes diesel cars costlier.European automobile manufacturers aassociation estimate overall lower carbon emission of ddiesel vehicles than petrol vehicles. the overall efficiencyy of the diesel engine is still some 20 per cent greate r than the petrol engine. diesel fuel is denser than petrol and contains aboout 15 per cent more energy by volume (roughly 36.7 MJ/litre). This is because diesel has greater energy ccontent per litre than petrol. Howeever.
which accounted for only 17 per cent of total car & UV sales. Launches of diesel variants in this segment will mark a sharp shift in diesel penetration levels.000.5 million cars and UVs . more than one-fifth of small cars sold were diesel cars. Beat and Figo in the small-car segment with diesel variants as well.CRISIL CRB Customised Research Bulletin The cost of owning a diesel vehicle is.5 years due to the gap between prices of petrol and diesel. Carmakers launching more diesel models.CRISIL Research Car manufacturers have launched a number of diesel models in the last two months. this segment had a 60 per cent share in total car & UV sales. diesel models. Of the 2.000 km per year will break even in 3. In 2010-11. Second. Diesel vehicles are therefore more viable at the current price difference between petrol and diesel.000-100. Nissan. manufacturers are launching more diesel variants. insurance premium and registration charges are greater for a diesel model. Despite the higher cost of owning the vehicle. General Motors and Ford launched Polo. are costlier than their petrol counterparts by Rs 80. however. Given the growing uncertainty over further increases in petrol price. greater. with their more complex engine design. customers who use diesel cars for at least 15. In 2010-11. First. maintenance charges. Volkswagen Polo Maruti Suzuki Swiftre-launch Nissan Micra Mid-size Volkswagen Vento Hyundai Verna cars Maruti Suzuki SX4 Ford Fiesta Nissan Sunny General Motors Unnamed model Maruti Suzuki Swift Dzire smaller version Source: Industry. Recent and expected diesel model launches Segment 2010-11 2011-12 Player Model Player Model Small/Comp Ford Figo Tata Motors Nano act cars Ltd. we expect buyer preference for diesel cars to increase over the next five years. A few years ago. Volkswagen. especially in the small cars segment To meet the rising demand for diesel cars. Micra. especially in the small-car segment. diesel variants were largely restricted to the Cumulative savings accruing to a diesel car owner sedan (A3-A6) models.
Source: Industry.000 were diesel-based.000 Year 3 ~Rs 85. 910.000 kilometers per annum ).000 Difference in prices of petrol and diesel car Rs 80.000 1. CRISIL Research 2 . fuel cost.000 Breakeven at 3.000 Year 2 Rs 54.sold in the year. maintenance charges and insurance premiums (CRISIL Research assumes that an average car travels 15.000 Year 4 ~Rs115.5 years Note: Cost of owning a vehicle includes interest expense. Launch of diesel variants in the volume-heavy small-car segment Year 1 ~Rs 22.00.
CRISIL Research expects such stations to increase to number almost 570 by 2014. CNG/LPG cars accounted ff or 6 per cent of total cars and UV sales. CRISIL Research expects sales of such vehicles to inncrease over the next five ective alternative to diesel cars. CNG/ LPG are cheaper by about Rs 6 per . covering another 550-60 cities. penetration of diessel cars over the next 5 years. and defer the break-even point of dieesel cars by 6-8 months. During 2005-06 to 20010-11. CNG/LPG cars of car sales by 2015-16 With more CNG/LPG refuuelling points and service centres being established. Despite that. While offeringg a mileage similar to that of diesel cars. presenting a cost-efff were set up across 50 citiess . CRISIL Researcch expects diesel car sales to remain at about 2 million. Any move by the government to reduce subsidies on diesel or impose additional excise duty on diesel cars could bring down peenetration levels. In 2010-11. Sales of diesel cars & UVs will likely mmore than double to 2.will further increase penetration of diessel cars over the next 5 years. 300 CNG stations years. CRISIL Research therefore expects penetratio n levels of diesel vehicles to rise to nearly 45 per cent in 2015-16 from 36 per cent in 2010-11. Top gear: Share of diesel cars to increase faster over the next 5 years P: Projected Source: CRISIL Research 67% 58% 33% 36% 6% 0% 20% 40% 60% 80% 100% 2005-06 2010-11 Petrol Diesel CN 46% 45% 9% 2015-16P NG As infrastructure gets will account for a tenth o better.3 million units in the next fivee years.
(Please note that the views eexpressed here are those of CRISIL Research and not o f CRISIL s Ratings division. CRISIL Research operates independently of and does not have access to informaation obtained by CRISIL's Ratings Division.) 3 . almost 10 per cent new cars & UVs sold ovver the next 5 years are expected to run on CNG/LPGG.litre. On account of these ff actors.
CRISIL CRB Customised Research Bulletin Indian Economy Economic Overview April 2012 Medium Threat Sectoral inflation Interest rates Foreign inflow (US$ bn) Credit growth Trade growth High Threat Inflation Industrial production growth Currency -2 8 18 Feb-10Jun-10Oct-10Feb-11Jun-11Oct-11Feb-12 WPI CPI-IW -15 5 25 Mar-10Jul-10Nov-10Mar-11Jul-11Nov-11Mar-12 Primay Fuel Manufacturing -5 -1 3 7 11 15 Jan-10Apr-10Jul-10Oct-10Jan-11Apr-11Jul-11Oct-11Jan-12 Mfg 2 6 10 Mar-10Jul-10Nov-10Mar-11Jul-11Nov-11Mar-12 1 Yr 10 Yr 40 50 60 Mar-10Jul-10Nov-10Mar-11Jul-11Nov-11Mar-12 Avg Rs per US$ -5 0 5 10 Mar-10Jul-10Nov-10Mar-11Jul-11Nov-11Mar-12 FDI+ECBs Net FII flows -40 0 40 80 Feb-10Jun-10Oct-10Feb-11Jun-11Oct-11Feb-12 Exports Imports 10 15 20 25 Mar-10Jul-10Nov-10Mar-11Jul-11Nov-11Mar-12 Macroeconomic Indicators .Forecasts .
4 .5 per cent of GDP. slightly higher than our pre-budget forecast of 7.7 per cent. Although pressure on the current account w ould ease somew hat during 2012-13 as compared to 2011-12. both of w hich are likely to be passed on to the consum ers. industrial grow th w ill be relatively higher than the preceding year due to RBI's supportive monetary stance.Source: CRISIL Centre for Economic Research 2012-13 Rationale Agriculture 3. grow ing at 8. Interest rate 10-year G-Sec (Year-end) 7.0 Inflation WPI-Average 6.3 to 7. The revision has been on account of the continued firmness in oil prices and increase in the indirect and services t ax rates in budget 2012-13. Fiscal deficit As a % of GDP 5. w hich w ill support the rupee against the US dollar.6 Services 8. We expect the government's revenue position to remain w eak during 2012-13 in view of the GDP grow ing at 7 per cent. w e are pushing our outlook upw ards. slightly higher than our previous expectation of 5. FDI and FII.2 We expect WPI-based inflation to average at 6. Exchange rate Re / US $ (Year-end) 46. w e expect the situation in the capital account to improve on account of higher inflow of both. At 5.8 by March-end 2013. Grow th GDP is expected to grow at 7.8 per cent.5 The rupee is expected to settle at aroun d Rs 46. How ever. Considering the continued higher government borrow ing coupled w ith higher inflation and the expectation of a less than 100 bps cut in policy rate.2 per ce nt in 2012-13.5-7.8 We expect yield on the benchmark 10 year G-sec to be in the range of 7.6 per cent. it w ill remain on the higher side.8. In addition.5 The fiscal deficit for 2012-13 is estimated to be at 5. fuel and fertiliser subsidies. w ill remain the key dri ver of grow th. w e do not expect either a significant compression in government expenditure or in the subsidy burden due to higher food.0 Industry 5.5 to 7.0 per cent in 2012-13. assuming a mild rece ssion during early 2012 in the Euro Zone and no significant progress on domestic polic y reforms.5 per US dollar by March-end 2013. The services sector.7 Total 7.
driven bby supply expansions and new launches. Growth in all segments is exppected to remain moderate and slower than in recennt years. supply-side impetus in the form of an improving finance scenario.Two-whheeler hheeler Industry Overvieww Moderating trend in growth too continue in 2012-13 The domestic two-wheeler industry groowth for 2011-12 moderated to 14. Slower income growth and subdued consumeer sentiment are key constraints to short-term growth pprospects over a high base.5 per cent while motorcycle and moped sales grew aat a much lower pace of 11.segmental yyearly growth trend Growth for 2012-13 is expected at around 10-12 percent. demand. Major new launches expected in the executive motorcycles and scooters segments would drive growth along with a turning intereest rate cycle and better finance availability. While motorcycle sales have been convergging to a slower . Scooter sales growth is also expected to moderate but would continnue to remain the highest among segments. in line with the long-te rm growth trajectory of the industry. Scooters to continue leading growwth in 2012-13 Domestic two-wheelers growth was ledd by the scooters segment in 2011-12. Rural demand (40 per cent of total demand) is expected to slow in 2012-13 givven the sluggish growth expected in farm incomes.9 and 11.4 per cent resspectively.8 pper cent in 201011. -15 -5 5 15 25 35 45 2003-042004-052005-062006-07 Motorcycles Mopeds (%) 2007-082008-092009-102010-112011-12 Scooters Two-wheelers However. while exports recorded a growth oof 35 per cent in 2011-12 over 27 per cent in 2010-11.1 per cent from 25. Two-wheeler . which grew by 244. entry of nnew players and product launches in high-volume/high-ggrowth segments would provide some buoyancy to demmand towards the end of the year.
high utilisaation levels Robust growth in two-wheeeler volumes amid lower capacity additions helped bboost capacity utilisation to around 88-90 per cent durring 2010-11 and 2011-12.long-term growth trajectory. scooter ssales growth has remained higher owing to pent-up demand and major supply expansions by segment leaders during the year. motorcycle and moped sales growth is expected to continue moderating with slowing rural Source: SIAM and CRISIL Ressearch Expansion plans acceleerate with intensifying competition. 5 . Incremental capacity oof 6. 55-60 billion over the medium term.5-7 million units (around 35-40 per cent of industry-wwide capacity at the end of 2010-11) is expected to comme on-stream over 2012-13 and 2013-14. largely drivenn by newer players. Capital expenditure is expected to total Rs. Consistently high utilisattion levels amidst the heightening competition haave encouraged players to undertake major expansionn plans over the medium term. In 2012-13.
0 per cent in 2012-13. Nissan. Beiqi Foton.5 per cent in 2010-11. In the MHCV segment. This along with higher interest rates impacted new truck sales with MHCV sales growth moderating to 9 per cent in 2011-12. growth in MHCV sales would be driven by a shift in demand for higher-tonnage trucks. monsoons. model launches across tonnage points would push up demand.CRISIL CRB Customised Research Bulletin Industry Overview Macroeconomic factors indicate continued near term moderation in CV industry Commercial vehicles (CV) sales volumes are expected to continue to moderate. long-term picture remains bright Low industrial production and a slowdown in mining in certain states impacted freight availability for transporters in 2011-12. higher comfort and more productivity. growing by 10-13 per cent (yoy) in 2012-13 vs 18 per cent growth in 2011-12. while growth momentum will continue in LCVs. We expect the response to advanced trucks to be driven by Commercial vehicles large fleet operators and large organised retail players who are willing to pay upfront for more long term profitability in terms of durability.Prima World truck and Unitruck. On the other hand. In 2012-13. General Motors (GM). MHCV sales to moderate in the short-term. led by continuing weakness expected in economic growth. local players like Asia Motor Works. Shanghai Automotive Industry Corporation (SAIC). We expect this to have a relatively higher impact on MHCV (goods) demand. finance availability and freight rates continue to remain key monitorables that can impact the growth of the CV market.9 per cent during this period from 8. GDP growth decelerated to 6. India's GDP is expected to grow by 7. MHCV sales growth is expected to continue to . Entry of new players to intensify competition The dynamics of the CV industry is set to change over the next few years with the entry of international players like Daimler. These changing dynamics will intensify competition and accelerate product development in the industry. In the long run. over the past year. Tata Motors and Ashok Leyland have launched superior platforms . Economic growth. Likewise. respectively. CV sales moderated to 18 per cent (y-o-y) from the 28. Mahindra and Mahindra are expanding their product portfolio.5 per cent growth posted in 2010-11. Ashok Leyland. In 2011-12.
however. followed by ICVs. . a fixed duty of Rs 10. Earlier. besides the basic duty hike of 2 per cent. as freight movement and GDP growth improve. are expected to be strong over the long term. Under the new duty structure.moderate to 5-8 per cent. chassis-only sales will now be charged at 15 per cent or 25 per cent tax (based on chassis type). Thus. the fixed duty of Rs 10. CV sales. New duty structure discourages chassis-only sales The basic excise duty on commercial vehicles has been increased to 12 per cent from 10 per cent in the Union Budget 2012-13. the major change is in the form of a new duty structure aims to incentivise sales of fully-built trucks and discourage deals where transporters buy only the truck chassis from the OEM and get the body built from unorganised players. Prices of commercial vehicles are expected to increase in line with the duty hike. However. Tippers will continue to grow faster.000 on chassis sales was removed and the ad valorem tax was increased by 3 per cent. who are not covered by excise duties.000 + a 10 per cent or 22 per cent tax (based on chassis type) was prevalent on chassis-only sales.
5 tonne payload vehicles like Tata AAce Zip) is also expected to eat into three-wheeler sales. LCV sales grew by 30 pper cent despite higher interest rates and slowing econnomic growth. Increasing competition from subone tonne vehicles (with the launch of 0.4% -22. The SCV segment comprises sub-one tonne / mini-trucks and pick-ups. Three-wheelers to grow at modesst pace Sales of domestic goods three-wheel ers grew by 6. sales of SCVs will grow the fastest. Players buying only the chassiss. Growth in largee three wheelers continues to decline owing to substituution by sub-one tonne vehicles. as these geet substituted by both SCVs on the lower end and intermediate commercial vehicles (ICVs) on the highher end of the CV value chain. as well as entry into nnew markets like Karnataka and Assam. Growth in 2012-13 will primarily driven by replacement demannd and growth in small three wheelers. LCV segment is expecteed to grow at a strong rate of 16-18 per cent. on account of increasing consumption annd need for lastmile connectivity. inflation concerns and higher interest rates. will thus pay a minimum duty of 15 per cent (2 per cent increase in basic duty + the 3 per cent additionaal on the chassis price). while large threee wheelers are expected to decline. whhich has led to a tightening financing scenario. In 2012-13.4 per cent y-o-y in 2011-12. Rajasthan etc. Within thhe LCV segment. Rising SCV sales to drive LCV deemand In 2011-12. This growth was in turn driven by a robust 32 per cent growth in small co mmercial vehicle (SCV).The new structure will aid the purch ase of fully-built vehicles. Trend in domestic three-wwheeler sales 13. where only the basic duty off 12 per cent will apply. growth is expected to bee modest due to uncertainty on matters such as fuel pricce hikes. AAndhra Pradesh.4% -3 1 0 30000 60000 90000 120000 . In 2012-13. whhile that of upperend LCVs will moderate. Growth in smaller vehicles was boosted by Gujarat-based Atul Au to's expansion in existing markets like Maharashtra.
0% 10.0% -30.4% -40.150000 180000 2006-072007-082008-09 Domestic Sales Volume (Units) 37. SIAAM Growth in LCV buses to drive overall bus sales Demand for buses moderatted in 2011-12 over a high base.0% 2009-102010-112011-12 e Y-o-Y growth (RHS) Source: CRISIL Research.0% -10. 7 .3% 1.0% 6. closure of JNNURM scheme.0% 0.0% 20. CRISIL Research estimates growth in bus ssales to remain modest in 2012-13 given the weak eco nomic environment. increassed price of vehicles due torise in excise duty combine d with high interest rates.6% 11. on account of fewer JJNNURM deliveries and an overall economic slowdoown.0% -20.
Further. Demand for UVs to grew by 14. players with lower volumes generated higher growth with Daimler. continued to remain higher when compared to Cars & UV sluggish industry growth of 4. While slower growth in income will seek to limit growth. While limited availability of diesel engines restricted growth in sales.7 per cent. Demand for utility vehicles will continue 13-15 per cent in 2012-13 as newer models with attractive price points continue to drive growth. with limited diesel availability in cars. the OEMs also had to battle rising inventory of petrol models. Exports growth to be driven by India's export hub potential. low base effect (due to production problems during 2011-12) and increase in diesel engine availability will aid growth. During the year. We expect domestic passenger vehicle sales to grow by 10-13 per cent in 2012-13 with pickup in small car sales. however. industry witnessed a huge shift of demand towards diesel vehicles owing to the widening gap between prices of petrol and diesel. higher diesel supplies in UVs also added to growth. BMW and Nissan growing by more than 100 per cent.1 per cent in 2011-12 Domestic utility vehicles sales grew by 27 per cent in 2010-11 as new models launched by players like Daimler. Growth moderated to around 14 per cent in 2011-12.7 per cent in 2011-12 in which car sales grew by a mere 2.CRISIL CRB Customised Research Bulletin Industry Overview Cars and UV industry growth moderated to 4. BMW. Additionally. Increase in cost of ownership and inflation is expected to be lower than in 2011-12 which will aid car purchases. affected production. interest rates and higher inflation (translating in lower disposable income). entry of new players in export markets Exports grew by around 14 per cent over a low base of 2010-11 despite a slowdown in Europe which is one of . New model and variant launches helped industry grow by 14 per cent.2 per cent on account of increase in fuel prices. severely limiting growth of the industry already battling a slowdown.7 per cent owing to high cost of ownership Cars and UVs grew by 4. Maruti and M&M generated greater buying interest. Production troubles caused by labour issues at market leader Maruti s plant.
could increase exports with lower demand in the domestic market. Export growth Source: Industry. one of the largest exporters.the key export markets. exports of Nissan Micra and Ford Figo overseas further aided growth. Also. We expect exports to grow at 12-14 per cent in 2012-13 as players explore newer geographies in line with their objective of developing India as one of their important export hubs. Exports grew as Hyundai. CRISIL Research 6% 9% 55% 33% 0% 14% -10% 0% 10% 20% 30% 40% 50% 60% 0 100 200 300 400 500 600 2006-072007-082008-092009-102010-112011-12 Units in '000 Export volumes Growth (%) .
This will result in a drop of 300 bps in capacity utilization. utilization is expected to drop from 69 pper cent to 66 per cent in 2012-13. 9 . Thus.76 millionn units taking the total capacity to 5.3 million units by 2012-13.Capacity additions coupled witth moderating demand to lower capacity utilizat ion CRISIL estimates the capacity in the passenger cars and UV industry to grow by 0.
CRISIL Research expects auto component exports to grow by 25-27 per cent y-o-y in 2011-12. This would be a significant moderation from the strong growth rate registered in the previous 2 years on account of moderation in OEM demand for auto components. and by 15-17 per cent in 2012-13. although the threat of cheaper Chinese imports will persist. Replacement demand growth outlook would remain stable in 2012-13.CRISIL CRB Customised Research Bulletin Industry Overview OEM growth to continue moderating in 2012-13 The auto components industry is expected to grow by 16-18 per cent y-o-y in 2011-12 and 12-14 per cent in 2012-13. In 2012-13. OEM demand growth is likely to continue moderating given the lower growth outlook across commercial vehicles. thus restricting pricing flexibility in this segment. Replacement demand is expected to grow at slower pace with continued threat of cheaper imports. tractors and two-wheelers. Segment-wise offtake of auto components (201011) 53 (per cent) 2 6 21 18 Threewheelers Tractors Commercial vehicles Twowheelers Cars and utility vehicles Source: CRISIL Research Auto components Exports growth to moderate in line with global markets in 2012-13 Growth in exports of auto components has been driven by increased sourcing of components by global OEMs from India and recovery in automobile production in target markets. Auto component exports are expected to grow on increasing penetration of companies in key export markets. Exports growth is likely to moderate in 2012-13 given the lower growth outlook in major destination markets .
ACMA 34 16 19 20 34 44 -3 33 59 30 44 19 9 19 7 28 -10 0 10 20 30 40 50 60 70 1995-961996-971997-981998-991999-002000-012001-022002-032003-042004-052005-06200 6-072007-082008-092009-102010-11 (per cent) .Trend in yearly export growth of auto components Source: CRISIL Research.
with expected growth in farmm income amid improving MSPs (minimum support pprice) and higher farm output. Hence. agricultural credit increased at a CAGR of 16 per cent per year. Thee government has increased the agri-credit target by Rs 1. However. Agriculture credit growth 90 110 130 . as mandi prices have fallen below MMSPs. leading to a fall in farm income. CRISIL Research estimates domesttic tractor sales growth to moderate to 3-5 per cent inn 2012-13. Rural farm incomes are estimated to grow bby 12 per cent in 2011-12 (on the basis of MSP. the growth momenntum in domestic tractor sales continued in 2011-12. Domestic sales of tractors increased aat around 15 per cent CAGR during the same period. MSPs index Tracttors Growth in agricultural credit disbursements aiding domestic demandd for tractors During 2005-06 to 2010-11. Around 85-90 per cent of tractors sold are bo ught on credit. thus impacting traactor sales going forward. PSU banks are still cautiouss and going slow on tractor financing. Thee tractor industry is expected to have grown by 11-14 pper cent in 201112. the real growth is estimated to be just 4-5 pper cent for 201112. any major changes in financinng norms directly impact demand for tractors. thuss enhancing farmers' ability to buy tractors.000 billion for 2012-13 in the budget. The expendituree for 2011-12 will be in line with the target. Credit availability will alsso be stable with increasing focus of NBFCs on trractor financing. Crop holidays and low sowingg in the southern region (due to scanty rainfall in Occtober-December 2011) will impact cash availability of faarmers in the first half of 2012-13.'s quoteed). The ggovernment's emphasis on increasing agricultural credi t in the past has played a crucial role in boosting demaand for tractors. as 72 per ce nt of the target was alreadymet in the first 9 mon ths. Credit availability has alwways been an important demand driver for the tractorr industry. We expect this to be acontinued positive for tractor sales. Agricultural credit usage in farm mechannisation has been increasing steadily over the years. However.Industry Overvieww Domestic sales growth to moderaate in 2012-13 After a strong growth of 32 per cent in 2009-10 and 20 per cent in 2010-11. backed by government initiatives to proomote the sector.
150 170 190 210 230 250 2001-022002-032003-042004-052005-062006-072007-08 Wheat Rice Sugarca ( index with base yr: 2000-01 ) 2008-092009-102010-112011-12 ane Cotton Source: GOI 1805 0 500 1000 1500 2000 2500 3000 3500 4000 4500 5000 2005-062006-072007-08 ( Rs Billion) 4750 2008-092009-102010-112011-12 E Source: Agri corp website and CRISIL Reesearch 11 .
however.8%. The y-o-y benefit in raw . we expect Hero Motocorp to maintain its market share on the back of its strong presence in the rural markets and slew of new product/variant launches. material cost was partially offset by 28% increase in employee costs. In Q4FY12 and FY13.6% q-o-q). Adjusted EPS of Rs 30.8 bn. Valuation Grade Fundamental Grade 1 2 3 4 5 1 2 3 4 5 Poor Fundamentals Excellent . it increased by 43 bps q-o-q mainly due to depreciation of Indian rupee (~15% of raw materials are imported).CRISIL CRB Customised Research Bulletin Independent Equity Research Report Hero MotoCorp Ltd (January 25. EBIT margin was up by 60 bps y-o-y (declined by 34 bps q-o-q) to 10. Revenues were up ~17% y-o-y (~3% q-o-q) to Rs 59. Slew of new model/variant launches to defend market share Competition is expected to increase going forward on the back of new launches and capacity expansion by strong players like Honda Motorcycle and Scooter. EBIT margin was lower than expected on account of increase in raw material cost. Hero MotoCorp gained ~160 bps market share in the domestic two-wheeler segment to reach 41% share in Q3FY12.7 was up 20. CRISIL Research expects growth in domestic two-wheeler industry to moderate and competition to intensify. 2012) Hero MotoCorp geared up amidst rising competition CFV matrix Hero MotoCorp s Q3FY12 revenues outperformed CRISIL Research s expectations driven by higher than expected volume and realisation growth. Q3FY12 result analysis . partially offset by higher taxes. India. We have increased our FY12-FY13 revenue and earnings estimate and maintain the fundamental grade of 5/5.5% y-oy (1. . PAT margin was up by 30 bps y-o-y on account of increase in EBIT margin. PAT margin outperformed on the back of higher interest income and lower tax rate. aggressive new model / variant launches combined with strong brand recall.4% aided by price hikes. Realisation per vehicle was up 5% y-o-y while it marginally increased q-o-q. volume growth was ~11% y-oy and ~3% q-o-q. We. While raw material cost declined 109 bps y-o-y to 73. However. expect Hero Motocorp to maintain its strong market position on the back of its deep presence in rural markets.
890 from Rs 1.302 236.8% 5.9 10. we have raised our fair value to Rs 1.4% 9.41 Free float (%) 0.6 64.595 52-w eek range (Rs) (H/L) 2.31 Valuations: Current market price is aligned Shareholding pattern After factoring in a higher earnings estimate.276 197.8 13.2 6.57 Avg daily value (30-days) (Rs mn) 1162.7 (10.0 EV/EBITDA (x) 19.150 164.874 27.2 RoE(%) 38.1) 18.8 8.6 119.432 EPS-Rs 64.786 27.777 26.8 6.5 137.6 8.7 Market cap (Rs mn)/(USD mn) 377.8 111.345 20.2% 32.203 EBITDA 17. At this fair value.440 Adj Net income 12.5 1.1 72.4 6.4 EPS grow th (%) 33.6% 8.5 62.2% 52.6% 4.8 15. We retain the valuation grade of 3/5.2% 5.7% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Mar-11 Jun-11 Sep-11 Dec-11 Promoter FII DII Others Performance vis-à-vis market 1-m 3 m 6 m 12-m Returns Hero Motocorp .937 22.0 50.8% 9.497 Enterprise value (Rs mn) 331.2% 52.1 16.6 7.7 P/BV (x) 9.2 RoCE(%) 45.9 14.9 12.250/1.084 23.4779 Avg daily volumes (30-days) 631160.2% 52.1 61.1 52.5 11.8x FY13 earnings estimate.386 36.Fundamentals StrongDownsideStrongUpside Key stock statistics Nifty/Sensex 5127/16996 NSE/BSE ticker HEROMOTOCO Face Value (Rs per share) 2 Current market price* 1888 Shares outstanding (mn) 199.8 PE (x) 29.3 55.034/7.376 Beta 0.9 Dividend yield 1.7 69.9 100.8% 33.2% 4.083 271.9 18. the implied PER is 15.8% 33.7 12. Key forecast(financials) (Rs Mn) FY09 FY010 FY11E FY12E FY13E Operating income 129.8 68.9 2.6 67.8x FY12 earnings estimate and 13.7% 34.678/6.797 based on the discounted cash flow method.350 41.8% 8.
CRISIL Research estimate 12 .2% -9% 4% 8% NIFTY 9% 1% -9% -11% E: Estimate Source:Company.
Automobile forecasting/statistical ttool development services Short term demand and supplyy forecasts based on econometric models Medium-to-long term demand and supply forecasts model for strategic planningg ac tivities .Customised Research SServices Automoobiles Coverage Ec Materials/ intermediates Steel products Aluminium Rubber Polymers Transport infrastructure Roads & highways Ports & Shipping Airports Au .T conomic Research Auto Finance CV Finance Car Finance 2W Finance Automotive Fuels Diesel & petrol CNG & LPG Crude oil utomotive Cars and Utility hicles Commercial Vehicles Tractors Two Wheelers Auto components Tyres Key Offerings Forecasting .T .. Demand potential for alternative fuuel vehicles ...T . rubber and polymer Market dynamics ..C . Commodity prices for key raw matterials like metals.C Ve . Market assessment and outlook off auto components and tyre business in India . Market entry strategy and busines s planning support ..A ..
Competitive benchmarking studiess based on: Product portfolio.. growth ttrends. dynamics and profitability of the used vehiclee segments . Impact analysis of developments cconcerning auto fuels. characteristics. distribution nnetwork and marketing strategies for new and ex issting products Supply chain and sourcing straategy of OEMs Financial parameters. economic indicators and raaw material prices Financing options . Financial assessment of vendors 13 . struct ure. Market size. Benchmarking of independent autoo financiers with their competitors . export potential etc of industries/compani ees Cost-structure and operationall efficiency of an OEM vis-à-vis other OEMs .
CRISIL CRB Customised Research Bulletin Media Coverage 14 .
for selecting fund managers and monitoring their performance Equity and Company Research Largest independent equity research house in India. demand forecasting.5 trillion (USD100 billion) by value Retained by India s Employees Provident Fund Organisation. covering more than 14. comp rising 85 per cent of outstanding securities Sole provider of fixed income and hybrid indices to mutual funds and insurance c ompanies.000 securities Largest provider of fixed income valuations in India Value more than Rs.401 companies listed and traded on the Nationa . focusing on small and mid-ca p companies. infrastructure. profita bility analysis.Our Capabilities Making Markets Function Better Economy and Industry Research Largest team of economy and industry research analysts in India Coverage on 70 industries and 139 sub-sectors. industry structure and regulatory framewo rks 90 per cent of India s commercial banks use our industry research for credit decis ions Special coverage on key growth sectors including real estate. coverage exceeds 100 companies Released company reports on all 1. the world s largest retire ment scheme covering over 50 million individuals. lo gistics. we maintain 12 standard indices and over 80 customised indices Ranking of Indian mutual fund schemes covering 73 per cent of assets under manag ement and Rs. and financial services Inputs to India s leading corporates in market sizing. and pro ject feasibility Published the first India-focused report on Ultra High Net-worth Individuals All opinions and forecasts reviewed by a highly qualified panel with over 200 ye ars of cumulative experience Funds and Fixed Income Research Largest and most comprehensive database on India s debt market. provide growth forecasts. emerging trends.33 trillion (USD 650 billion) of Indian debt securities. expected investments.
a global first for any stock exchange First research house to release exchange-commissioned equity research reports in India Assigned the first IPO grade in India .l Stock Exchange.
Contact us Siddharth Arora Prosenjit Ghosh Phone: +91 22 3342 4133 | Mobile: +91 993 08 85274 Phone: +91 22 3342 8008 | Mob ile: +91 992 06 56299 E-mail: sarora@crisil. Ulsoor Road Bengaluru . Venus Atlantis Nr. Egmore Chennai . Nagarjuna Hills (Near Punjagutta Cross Road) Hyderabad .700 071.com E-mail: email@example.com Our Offices Ahmedabad 706. Uma Chambers Plot No.500 482. Sunrise Chambers 22. 4th Floor 57 Chowringhee Road Kolkata . India Phone: +91 80 2558 0899 +91 80 2559 4802 Fax: +91 80 2559 4801 Chennai Thapar House.600 008. 9&10. Plot No. Montieth Road. India Phone: +91 44 2854 6205/06 +91 44 2854 6093 Fax: +91 44 2854 7531 Hyderabad 3rd Floor. 43/44. 1 & 2 . Block 'B'. Reliance Petrol Pump Prahladnagar. Ahmedabad. India Phone: +91 33 2289 1949/50 Fax: +91 33 2283 0597 New Delhi The Mira. G-1 1st Floor. India Phone: +91 79 4024 4500 Fax: +91 79 2755 9863 Bengaluru W-101.560 042. India Phone: +91 40 2335 8103/05 Fax: +91 40 2335 7507 Kolkata Horizon.
India Phone: +91 20 2553 9064/67 Fax: +91 20 4018 1930 CRISIL Limited CRISIL House. Central Avenue Hiranandani Business Park. Mumbai .400 076. India Phone: +91 22 3342 3000 | Fax: +91 22 3342 8088 www. Mathura Road New Delhi . Ghole Road Shivaji Nagar Pune .110 065.411 005.Ishwar Nagar. Powai.crisil. India Phone: +91 11 4250 5100 +91 11 2693 0117/121 Fax: +91 11 2684 2212 Pune 1187/17.com CRISIL Ltd is a Standard & Poor's company .
This action might not be possible to undo. Are you sure you want to continue?
We've moved you to where you read on your other device.
Get the full title to continue listening from where you left off, or restart the preview.